Whatâs
Wrong Today:
James
Surowieki in The
New Yorker:
(emphasis by the Wrongologist)
any capitalist society most people are bound to be part of the middle and
working classes; public policy should
focus on raising their standard of living, instead of raising their chances of
getting rich. What made the US economy so remarkable for most of the
twentieth century was the fact that, even if working people never moved into a
different class, over time they saw their standard of living rise sharply
And
here is Krugman writing yesterday about Surowiekiâs
article: (emphasis by the Wrongologist)
a decent life, you need to construct a society in which everyone has a decent
life â not a society in which everyone has a small but equal chance of living the lifestyle of the rich and
famous
How
much social mobility occurs in a society if politicians think the only goal is âequal
opportunity for allâ? In America, not much, and that hasnât changed in 40
years, according to a study by a team of economists from
Harvard and Berkeley led by Raj
Chetty. According
to Chetty:
mobility is low and has been for at least thirty or forty years. This is most
obvious when you look at the prospects of the poor. 70% of people born into the
bottom quintile of income distribution never make it into the middle class, and
fewer than 10% get into the top quintile. 40% are still poor as adults
A
time-honored meme is the Horatio Alger story, the American dream that anyone
can, through dedication and a can-do spirit, climb the ladder of success. But,
according to Surowieki: (emphasis by the Wrongologist)
isnât all that mobile, either: only 20% of people born into the middle quintile
ever make it into the top one. And although we think of US society as
archetypally open, mobility here is
lower than in most European countries
Horatio
has a smaller chance of making it big here than in say, France, since we have had the
same amount of economic mobility for the past 40 years. When politicians emphasize
mobility as opposed to decent living standards for all, or economic security, it becomes
easy to blame the âvictimsâ, that is, the very poor, the unemployed, the fringe
members of society: Whatâs the matter with you, why arenât you upwardly mobile
in this, the land of opportunity?
But today in the US, the pressure on mobility is mostly downward, not upward. That
is due to the confluence of several trends:
- Corporate
influence on our tax and labor laws to the advantage of the few
- The
mass movement of skilled, labor-intensive jobs to low cost countries
- The
rapid development in computer-assisted manufacturing and design that has
radically reduced the availability of solid middle class jobs
- The
huge growth in liquid assets employed in foreign tax havens, not in US businesses
Then,
the Citizens United decision sealed the deal for those entrenched at the top. Today,
most Americans don’t even know if
there could be a better way to build the economy.
Ironically,
these trends have been sold to voters as the next stage of the American free
enterprise system. Thus, the upward wealth transfer has been institutionalized
and accepted by many as necessary to keeping our country strong and for ensuring future
job growth.
It
has done neither. When 40% of Americans canât buy anything other than food and
gas, that hurts all of us.
What made
the US economy so remarkable for most of the twentieth century was the fact
that even if working people never left their economic class, over time they saw
their standard of living rise sharply. Median
income doubled in the US between the late 1940âs and the 1970âs. The
chart below shows that income growth has stagnated since the early 1990âs:
Thatâs
what has really changed in the past forty years. The economy is growing more
slowly than it did in the postwar era, the average workersâ share of the pie
has been shrinking, and fewer people are working today than in 2007. Itâs no surprise that people in
Washington prefer to talk about mobility rather than about this basic reality.
Raising
living standards for ordinary workers is hard: you need to get wages growing,
or to âprime the pumpâ with infrastructure jobs. Talking about things like
âredistributionâ and âmore taxesâ scares politicians, but austerity will not
improve economic growth, or lower our deficit.
Most
of us want a decent
society for everyone, including for the less talented and less fortunate. We
will always have some inequality, some people whose living standard is too low,
so there should be a decent floor which people can’t fall below.
We
call that the safety net and we can agree or disagree with where the floor
should be established, but without a concept of how to make our economy benefit
more of our citizens, we risk political upheaval.
Today there are rumblings of change,
but nothing coherent has emerged. People know something isnât right, but they
canât put their finger on it, and there is no organized push to develop a
coalition around modifying our capitalism to improve living standards for all
in the working classes.
The fact that the working
poor have flat screen TVs at home, or have iPhones does not mean that they have
a good standard of living. Many people
in the third world have those devices, along with the same food and job
insecurity we have here in America.
The next financial/economic
crisis will toss more people out of the middle class. The ladder of opportunity
will be shorter, excluding even more people.
We need to create a unifying
message that people will understand and rally behind, one that will cause them to stop voting
against their economic interests.
